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Storage Management

    How you store parts plays an important role in customer service. All the parts and materials that you stock serve a single purpose: to meet the customers’ needs. No matter how many parts you stock in inventory, they are useless until you retrieve them from storage for customer use.

    The speed with which you can retrieve needed parts is important to customers’ satisfaction with their experience at your dealership. You must be sure that you can locate the stored parts efficiently when needed. The ease with which you locate, retrieve and deliver parts when needed affects the efficiency of your parts, service and body shop departments. Your efficiency in the parts department has a dramatic effect on dealership profitability and customer satisfaction.

    The parts must also be kept in excellent condition while waiting for use. Your parts inventory represents a major investment that is kept in storage until required to meet customer needs. It is your responsibility to protect this investment for the dealer and to provide the customer with parts in perfect condition.

    Aside from the accuracy of the parts inventory records, the parts manager needs to be concerned with the preservation of the inventory against pilferage, fire damage and other hazards.

    The design of the storage facility, the equipment necessary for safe and efficient movement of parts and the procedures for maintaining and operating this facility comprise storage management. It is important to set up an effective storage and retrieval operation and to ensure continued efficient service for the customers?whether they are retail,

    wholesale or your own service department.


    Effective storage management meets three important needs:

    ? Safe and secure storage of parts and materials ? Efficient locating and retrieval of parts ? Maintenance of stored parts in excellent, salable condition Overview

    This chapter covers the following general storage management activities:

? Determining the space requirements and layout for storage of parts,

    accessories and materials for setting up a new parts storage area,

    expanding an existing parts department or relocating the parts


    ? Selecting storage systems, bins and racks 2 ? Designing the layout for the parts department and storage units that

    make the best use of space

    ? Selecting parts handling equipment

    ? Providing fire protection, preventing unauthorized entry and

    protecting employees from injury

    ? Implementing a physical inventory process to maintain the integrity

    of the parts inventory

    ? Monitoring the condition and operation of the parts storage facility to

    ensure continued optimum service to your customers Activities

    Determining Space Requirements

    Your primary focus at this point should be providing adequate space and

    a safe, efficient and functional arrangement in the parts storage area.

    This is a critical step, because it will affect the level of service to your

    customers, your efficiency of operations and the ease of expansion. There

    are significant differences between working with an existing parts

    department, remodeling an existing structure or planning the parts

    storage for an entirely new facility.

    Setting Up Shop

    Designing a layout for an entirely new parts department is a major task The parts that requires a great deal of effort to do correctly. Hasty decisions at this department has stage of the process could have a negative influence on parts operations adequate space and an for many years to come. See Chapter 1, Inventory Management, “Starting appropriate layout to an Inventory from Scratch,” for more information about setting up a new support all parts parts department. operations.

1. When planning a new dealership facility, use initial inventory

    requirements as the starting point for space planning purposes. To

    that, add space and inventory for business growth, possible additional

    vehicle makes and models and sufficient room for expansion.

    ? The GM Recommended Stocking Guide provides a beginning estimate

    of what parts you will need. Your retail planning guide, additional

    market growth or the opportunity for above average sales penetration

    will affect the breadth and depth of inventory needed. ? Plan for future expansion using market planning information. GM

    can provide information regarding the growth of your market. Also

    check with your local chamber of commerce, business development

    organization and local dealer organization to obtain all the

    information you can on the possible growth in your area. This will

    affect your parts inventory needs and offer insight into the need for

    future expansion.

    ? Consider the planning potential of your market and your dealer’s

    sales objectives. The inventory needed to support your GM retail


    planning guide should be regarded as the minimum business that you

    will have. The dealer wants a fair share of the market, and a well-run

    fixed operation will contribute greatly to surpassing the expected

    potential. The sidebar “Retail Planning Guide” talks about planning

    potential criteria.

Retail Planning Guide

    Retail planning potential is derived from the total number of vehicles that are

    expected to be sold in a given market. This potential is usually estimated using

    research by GM, R.L. Polk, J.D. Power and other market research organizations. In

    most instances, the planning potential is a conservative estimate of expected sales.

    The number of dealerships selling the same vehicle line, and the strength of

    competition from other manufacturers in the same market, are variables that affect

    the actual potential for your sales. The guides for setting up your dealership should

    be based on your actual potential. Your area of influence should be defined, your

    competition from other makes assessed and the effect of nearby dealerships selling

    the same vehicle line(s) considered in making your estimates of actual potential.

? Compare your planned space to the GM Guides for Dealer Parts

    Area, shown in Figure 6.3.3-1. If you have the opportunity to sell

    more than your planning potential, use the GM guides for the

    higher sales that you expect.

[Copy of Retail Planning Guide]

    [Figure 6.3.3-1: Guides based on planning potential]

    ? If you have a budgeted inventory value, General Motors has

    guidelines for space requirements based on the planned value of

    inventory. See Figure 6.3.3-2 for details.

[Copy of Fig. 4-2, pg. 4-8 of General Motors Parts Department Operations


[Figure 6.3.3-2: Guides based on parts inventory value]

? General Motors also has a computer program (Size It) that helps with

    space planning. Some regions prefer to use this program to determine

    space requirements. Size It estimates space based on a sophisticated

    model built from a composite of the various guides and your planned

    business volume (projected sales, profit projections, etc.). First, you

    need to answer a number of questions that are entered into the

    model. The program then allows you to revise the planning volume

    and various other variables to answer “what if” questions for various

    business scenarios.

    ? The guides, rules of thumb and the Size It computer model will give

    you a good estimate of how much space should be allocated for parts

    storage and operational efficiency. The most accurate determination

    of space requirements will come after you have specified how many

    parts you will need to properly serve your customers. Then you can

    work with storage equipment vendors to define how much space those

    parts need.

2. Occasionally, existing dealerships remodel, expand or relocate into

    another existing facility. Converting existing areas into a functional


    and efficient parts department requires the same diligence and

    planning as that for a brand new facility. The steps listed below are in

    addition to the criteria considered in the planning for a new facility.

    ? Determine how much space is available in the existing structure, or

    how much space should be allocated for parts storage. Several factors

    affect space requirements: historical sales data, expected growth, the

    desire to modernize, efficiency requirements, addition of a new

    business (body shop or wholesale), safety, security or improved


    ? In case your needs exceed available space, consider utilization of an

    off-site warehouse or a secure stocking area attached to the body shop

    for sheet metal and other bulky items. Be sure to consider the effect

    of off-site storage on operational efficiency.

    ? The parts sales history of the dealership provides a solid background

    for planning the new parts area. The sidebar “How Good Is My

    History?” identifies the factors that determine the quality of historical

    parts trends. Review them carefully before using your historical data.

How Good Is My History?

    Review your operation and critically consider whether all pertinent information was

    input into your inventory system.

    ? Have all parts sales been recorded, no matter whether they were on a repair order, to a retail customer, a wholesale account or an internal transaction? ? Have emergency purchase (chased parts) sales data been included in your parts transactions?

    ? Were all lost sales recorded? You need to know what parts were requested and not available from your inventory. You must also include parts you could not obtain from other dealers or parts jobbers, or cases when the customer was unable to wait while you ordered parts for them.

    You are trying to identify the correct inventory to supply your customers directly out of your stock. If your operation did not record the information to do that, you should

    estimate your total demand. You should begin immediately to record all non-stock

    demands and use that information to help with the estimate of what parts should

    have been in your inventory. Your current inventory must be analyzed to ensure that

    it is in good shape. As you know, your inventory should consist mostly of parts for

    model years three to six years old (approximately 50-60 percent). The remainder

    should be equally distributed between vehicles less than three years old and older

    than six years old.

    ? A business planning process similar to that covered in Chapter 6.2.2,

    Wholesale Business, should be followed to evaluate the need for

    additional space. The cost and benefit analysis must be discussed

    with your general manager and owner to determine the feasibility of


    Selecting Bin Storage Systems

    Many reputable firms manufacture manual or automated parts storage

    systems. You should review a variety of vendors’ products and services to select the best system for your needs.

    1. Invite a number of suppliers to demonstrate their parts storage


     5 ? You will get the best input from suppliers if you prepare a list of

    specifications or request for quotation that informs them what you

    are looking for. Include the space that you have to work with, the

    amount of inventory you plan to store, your budget, the possibility of

    future expansion, your interest in after-sale service and warranty

    issues. The best suppliers will provide you with only those solutions

    that fit your needs, saving you money and time in evaluation. ? Many people believe that three suppliers for any given type of

    equipment should be the minimum that you seriously evaluate. More

    may be better, but three at least ensures that you can evaluate and

    clarify a claim that is significantly out of line with the other two


    ? Ask the various vendors for a list of their customers. Contact those

    customers to find out what their experience has been in using the

    system. Also inquire about their satisfaction with the installation and

    ongoing support they have received from the distributor and

    manufacturer of the system.

    ? Compare the competitive system features and the support offered by

    the supplier to choose your source. Obtaining at least three bids will

    allow you to notice an out-of-line bid and clarify the specifications

    before you make your final decision.

2. Consider the advantage of using computer generated bin labels in

    your system. These labels (one example is shown in Figure 6.3.3-3)

    provide a professional appearance, are easy to obtain, are convenient

    to use and are cost effective.

[Insert figure of bin label from pg. 4-35 of GM Parts Dept. Ops Manual]

[Figure 6.3.3-3 General Motors bin label]

Many bin types and shelving units are available to meet every storage

    need. The sidebar “Storage Layout Alternatives” highlights some of the

    available options. Figure 6.3.3-4 shows a well-planned parts storage area.

    You can get help from the manufacturers of storage systems as you make

    your choices.

Storage Layout Alternatives

    More than one approach to parts storage will work for a parts department layout. In

    small dealerships, stocking purely by part number sequence works fine. However, in

    order to efficiently use bin space, most dealerships stock by group numbers,

    because the parts are assigned to a group of similar sized parts. Usually this

    arrangement results in a regular parts area, a bulky parts area and specialty areas

    such as sheet metal, moldings and exhaust systems.

Most parts operations place high-demand parts close to the area where they are

    used most. Very large operations, usually wholesale oriented, use a layout where the highest-demand parts are located nearest a central aisle, while parts with less

    frequent demand are located further down the side aisles (minimizing the distance

    traveled by the stock picker). Large wholesale operations will probably be more likely


    to use heavy-duty racks and pallet racking. These racks require more space for

    access and usually are placed adjacent to the shipping and receiving area.

Storage options range from basic shelving units to automated bin systems. Basic

    shelving units come in various depths so that you can optimize the space available. If you are planning on a mezzanine, some shelving units are strong enough to rest the decking directly on the unit without need of other support. Some automated units allow an operator to enter a part number and the system will rotate internal bins or drawers until the correct part is presented to the operator. While such systems are expensive, their cost is justified in situations where space is at a premium. This type of space-saving storage, combined with double decking (for areas with a minimum of seventeen feet of height), can increase storage area by 70 percent or more. Figure 6.3.3-4 shows an example of this type of storage.

[Insert line drawing of double decked parts department with moving aisles and

    automated units.]

[Figure 6.3.3-4: Making the most of available space]

    Laying Out Parts Storage Units

    Planning the layout of your parts department and effectively arranging

    your bins and racks requires careful consideration. The decisions made at

    this point will affect your operation for many years. The vendors who

    provide your storage equipment have much experience in laying out a

    parts department. They often provide computerized planographing to

    design your parts department. This activity allows you to determine how

    many of the various sizes and types of bins or racks you will need.

    Manual (very time consuming) and computerized planographing follow

    the same process.

    1. Prepare a complete list of parts in inventory. Use a preprinted

    inventory pad, if available, to cut down on your writing.

    2. Prepare a list of exchange parts, warranty parts and other transient

    items stored in the parts department but not part of the active

    inventory. Your service manager would be helpful in this


    3. For each part listed in steps 1 and 2, determine and record the


? Group and part number

    ? Quantity or guide level to be carried in stock

    ? Number of units in standard package

    ? Historical or estimated frequency of demand (picks)

    ? A notation for parts to be stored in drawers (“D” perhaps)

    ? A notation for sheet metal or other parts to be stored in racks ("R"


    ? A notation for items to be stocked in the bulky area (“B”)

    ? A notation for molding rack parts (“MR”)

    ? A notation for any other special locations (sheds, consignment, etc.)

    that you anticipate

    ? Physical size of the part or package. This is critical to selecting the

    size bin that makes the best use of your space, while protecting the

     7 part and providing adequate space for the anticipated number on


    4. Combine stocking levels and parts sizes to determine required bin

    (and rack) space.

    5. Planograph the regular parts bins, bulky part bins and the racks and

    special storage areas. See the sidebar “Planographing” and Figure

    6.3.3-5 for details on how to do this task.


    A planograph is a very specific visual layout of how each bin, specialty rack or location is to be laid out, part by part. The rule of thumb is to allow 25 percent of the available space for expansion.

    To do a manual planograph, you need to prepare scale drawings of the frontal view of each of your storage bin or rack types (graph paper works well). You should copy this drawing to provide more drawings than you expect to use. The same frontal

    drawing can be used for various depths of bins, but label them accordingly and be sure to keep the depth in mind when you are planning the parts placement.

    Start at the beginning of your annotated parts list and, group by group (or by demand category), note the part number of the part on the drawing of the appropriate bin, allowing the correct amount of space on the shelf. Then allocate space for the next part number in that bin and note the part number. Continue this until the bin is full, leaving space for future needs. Continue this process until you have a drawing of a piece of storage equipment with each part that you expect to stock.

[Illustration of completed planograph sketch Fig 4-7 pg.4-20]

[Figure 6.3.3-5: Completed planograph diagram for one bin]

6. Calculate the number of each type of bins required.

[Bin layout based on frequency of demand]

[Figure 6.3.3-6: Parts bin layout based on frequency of demand]

    Selecting Parts Handling Equipment

    Evaluate and select the parts handling equipment most effective for the

    size of the dealership and the anticipated volume of parts sales.

    ? Most parts departments, however small, need a two-wheel hand The parts truck. department has ? If you have the space, and handle many bulky or heavy parts, a four-equipment to safely and wheel cart may be useful in your situation. efficiently handle all parts ? The benefits of a power forklift should be considered, especially if you and accessories sold. do a large amount of engine or transmission work. There are compact

    standard fork lift trucks, battery powered walk-behinds and small

    lifts (manual or power lift) that are pushed around. ? If you have the space, and handle many full pallets of parts, a pallet

    jack may benefit your department.

    ? Many dealerships with a mezzanine or full second story, have

    elevators or powered conveyors to move material between floors.


    ? If you plan to do a large wholesale business, roller or skate-wheel

    conveyors leading from strategic areas of the parts department to the

    shipping area will improve efficiency.

    ? An adjustable-height loading dock platform or simply good

    (lightweight) dock boards may save a great deal of effort. This

    equipment is especially important if you anticipate a busy wholesale


Since this equipment represents a major investment to the dealer, and

    much of it requires specialized service and maintenance, care in selecting

    a vendor is critical. General Motors has evaluated most of this equipment

    and has approved vendors that meet stringent performance

    requirements. Contact your General Motors district parts manager for

    information on these vendors.

    Ensuring Safety and Security

    The safety of the employees, and the security of the parts and material in

    your parts storage area, are considerations that need to be addressed in

    the design of an effective parts department.

1. The health and safety of your employees while on the job is one of the

    most important aspects of parts management.

    ? Provide first aid kits, eyewash stations, fire blankets and any other

    appropriate medical emergency supplies. The companies that sell

    replacement supplies for these stations are usually more expensive

    than having an employee restock them. Consider whether the

    convenience of an outside vendor is worth the added cost and

    potential delays in delivery.

    ? Compile a binder with all Material Safety Data Sheets for hazardous

    materials and have it readily available for reference (see Chapter

    6.3.5, Hazardous Materials, for more detail).

    ? Prepare written policies and procedures covering health and safety

    regulations and practices. The local authorities and your insurance

    carrier can assist in developing these policies and procedures. Collect

    them in a binder or handbook provided to all employees working in

    the dealership.

    ? Prominently post maps with fire evacuation routes and diagrams

    showing the location of emergency equipment in case of a hazardous

    materials spill or flare-up.

    ? Prominently post medical emergency telephone numbers and verify

    their validity periodically.

    ? Plan and conduct safety drills regularly. Document your drills and

    training activities as well as recording all injuries and accidents. If

    you perform these preventive activities you should see fewer injuries

    and fewer productive hours lost. This may help minimize insurance


    2. Injuries caused by unsafe handling of parts can be minimized if your

    facility is designed well. Employees are less likely to fall and objects Parts storage are less likely to be dropped when you have the proper, well-systems are safe, maintained equipment. Developing and implementing safe operating minimize damage to parts procedures and guidelines will also help avoid accidents. and provide for efficient retrieval.


    ? Check all federal and local OSHA requirements relative to the operation of the parts department.

    ? Take into consideration any hazardous materials that may be Parts personnel utilized, stored or dispensed from the parts department (see are trained in emergency Chapter 6.3.5, Hazardous Materials). medical procedures. ? Ask your insurance carrier to provide specialized design and

    training guidance to ensure a safe working environment. ? Consult with local medical emergency providers to assist you in establishing medical emergency procedures.

3. Fire is a risk that affects both your employees and your Parts personnel

    merchandise. To prevent injury and material loss through fire, a are trained in the fire

    number of measures must be taken by every dealership parts prevention process.


    ? Consult with local fire prevention authorities and your building contractors to select fire retardant building materials wherever practical. Usually the additional cost will be quickly recovered in reduced insurance premiums.

    ? Evaluate fire extinguishing systems?compare the advantage of an

    inert-gas system that does no harm to the merchandise with the economy of a standard sprinkler system. Halon was banned from manufacture along with Freon 12 in 1994, but FE241 and FM200 systems have similar characteristics and are environmentally acceptable.

    ? Evaluate fire alarm systems and select the most suitable vendor. Ask for references and check with current users of the system to learn if it fits your needs. Find out which features are most important to your insurance carrier.

    ? Develop, document and implement a fire prevention process.

    ? Establish a fire alarm response process. Escape routes, notification responsibilities and in-house firefighting procedures should be planned and communicated to all employees?they should be included

    in the employee handbook, and brief procedures (see Figure 6.3.3-7 for a sample) and evacuation maps should be posted on bulletin boards, in counter areas, employee lunchroom, customer lounge and other appropriate places. Conduct fire drills often.

[Figure 6.3.3-7: Fire emergency procedure]

4. Preventing unauthorized entry to your storage area is vital to the

    integrity of your merchandise. Security procedures prevent ? Design the storage area to control access. Doors must be properly

    unauthorized access to placed for operational efficiency, but limit the number and make sure

    the parts storage area. when locked they can prevent unauthorized entry by even a determined intruder.

    ? Contact property security providers to help you select the most effective and economical security system.

    ? Plan coded or keyed access at all doors, and decide who has

    authorized access. When authorized personnel change jobs, even to transfer within the dealership, change the entry codes or re-key the doors. This step is very important to maintaining access control.


    ? Develop and implement a theft prevention process. The local police and your insurance carrier are experienced and can be helpful in this task. Include system controls that prevent any material leaving the storage area without appropriate authorization and set up an audit trail of every transaction. Ensure that only authorized personnel have physical access to the storage area.

    ? Evaluate security alarm systems available from many sources. Select the system most suitable for your needs and the layout of your dealership. A really complete system detects movement in the area, picks up sounds of an intruder's presence or break-in, and senses when access doors (or counter closures) have been opened. Your choices include monitoring systems, direct alarms to authorities or alarms to dealership personnel.

    ? Establish a security alarm response procedure. Decide who receives the alarm (manager, dealer or local police) and what response process results. This procedure should be distributed to the managers and included in the employee handbook. See Figure 6.3.3-8 for a sample security procedure.

[Figure 6.3.3-8: Sample of a security alarm response]

    Implementing a Physical Inventory Process A physical inventory Successful parts storage means that a part listed in stock by your is performed at least once a inventory system is physically available, in acceptable condition, easily year. located and ready to be sold. There is nothing more frustrating than

    checking inventory for a part needed by a customer or by the service

    department, noting that the part should be in stock and going to retrieve

    it, only to find an empty bin. When this scenario happens, it disappoints

    the customer and loses credibility for the parts operation.

1. The accuracy of your inventory counts is critical to your ability to

    fulfill a customer's needs for parts from your inventory.

    ? A physical inventory is either a starting point for a new inventory system or a periodic quality check of your operation. Choose a cycle for your inventory and a process by which to actually perform the inventory. Annual physical inventories are most common, but a perpetual inventory system allows you to count perhaps one or two bins every week of the year (thus avoiding a major project that disrupts parts operations once a year). Many businesses use both cycles to maintain the highest integrity of their inventory records. ? For an annual inventory, either an outside vendor must be selected or internal resources must be allocated to perform the actual physical count.

    ? If you choose to do a perpetual inventory, you must determine the schedule for which bins (or locations) need to be counted each week during the year. You should also designate someone on your staff to do the counting as part of the weekly routine and someone else to reconcile the count with the inventory system every week. ? Whether you have chosen to do an annual or a perpetual count, schedule and prepare for the actual physical count. Select the materials that will be needed: counting documents, summary forms, discrepancy resolution documents and the like (see Figure 6.3.3-9 for

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